Fianna Fáil spokesperson on Social Protection and Social Equality Willie O’Dea has raised concerns about the findings of the Melbourne Mercer Global Pensions Index (MMGPI) published today. The report found that Ireland’s pension system is ranked 11th out of 25 countries for a second year and that the sustainability of the Irish pension system is ranked in just 20th place. The reliance on the state pension is a key factor affecting Ireland’s sustainability ranking.
Commenting on the matter Deputy O’Dea stated that “the issue of pensions and adequate financial resources in retirement can no longer be ignored. Life expectancy is increasing and it is projected that demographic changes will result in considerable changes in the ratio between the numbers of people at work and those in receipt of pensions. This issue has been flagged several times before yet Fine Gael and Labour have failed to address it in any comprehensive way. ’’. Furthermore, the pension levy did serious damage to incentivise saving for retirement which resulted in a €2.4billin raid on private pension funds. While this was abolished in the latest budget the extension of the pension fund levy into 2015 was a betrayal of the government’s consistent claims that it would a temporary levy to fund job creation.
“The report highlights that we are too reliant on the state pension and we must look at other alternatives to ensure that our citizens have an adequate income in retirement. Pension coverage has to be improved and how we approach this requires serious consideration. Pension coverage is very low in certain sectors. The National Pensions Framework published in 2010 cites the examples of the hotel and restaurant sector (pension coverage of 23 percent) and the wholesale and retail trade (pension coverage of 36 percent) that have very low pension coverage. This has serious consequences for people working in these sectors and needs to be addressed.
“There are a number of options to consider. It is clear that there is a need for a low cost alternative if pension coverage is to be increased and this could be achieved through the involvement of the NTMA. Other options to consider include ‘auto enrolment’ which involves enrolling all employees into a pension scheme without forcing them to stay in it. This could help increase the proportion of people saving for a pension. While another option would be the establishment of a trust, similar to that in place in the UK, which would manage employee funds. However, before any decision is made a comprehensive analysis is required to determine the extent to which there is an under-saving problem and by whom and also the feasibility of such system in an Irish context.”
The report also highlights that the pension system could be improved by providing greater protection of members’ accrued benefits in the case of employer insolvency and Fianna Fáil concurs with this and believes it is vital that appropriate safeguards are in place to protect employees in such circumstances.
“Many people are shying away from addressing the issue of income security in retirement, feeling over-whelmed by the number and complexity of schemes and systems. It is crucial that people are given clear and plain English information so that they can make informed choices about their retirement and have a clear understanding of what they need to safeguard their financial future,” added Deputy O’Dea.